Balancing cost and justice concerns in the energy transition: comparing coal phase-out policies in Germany and the UK

Abstract

ABSTRACT Europe’s two largest economies – Germany and the UK – are phasing out coal from electricity production as part of European efforts to fulfil increased climate policy ambitions that require comprehensive energy system transitions. German and UK governments varied in the ways they sought support from diverse societal interests to make the transition socially acceptable and politically feasible. Drawing on 22 expert interviews and process-tracing methods, this paper compares and explains how political and economic institutional differences influenced efforts to balance energy transition concerns, like speed and cost-effectiveness with justice for companies, workers and communities most adversely affected by the transition. We find that the increasing attention to just transition perspectives after the Paris Agreement affected the design of coal phase-out processes in different ways in the two countries. Just transition concerns were given priority by policymakers in Germany, but more so if they overlapped with the interests of incumbents. In the end, politically powerful stakeholders dominated the policy outcome. In the UK, policymakers and stakeholders gave only weak attention to just transition concerns, mainly because coal’s market position had collapsed. Coal interests did not have strong representation in the decision-making process. But we find that just transition concerns are likely to gain more attention in the UK because a more challenging transition away from gas will take place over the next two decades. Key policy insights Policymakers must balance the objective of a fast decarbonization process against two other important concerns: cost-effectiveness and a just transition. Political-economic institutional design and capacity shape the extent to which just transition concerns are given weight in coal phase-out processes. State capacity for including just transition concerns in coal phase-out processes is higher when political and economic institutions strongly mediate government-stakeholder interaction in the policy process, and broad stakeholder participation increases the political feasibility and legitimacy of policy change. In Germany, the government’s attention to just transition concerns was strong because broad stakeholder representation in the formal process, and transition assistance policies to target potential losers in the transition, became crucial to enhance the legitimacy of coal phase-out policies. In the UK, cost-effectiveness trumped just transition concerns in the coal phase-out process, but just transition issues have increasing salience and will likely become pertinent in the upcoming gas phase-out process because more jobs and key economic interests are at stake. Our findings are relevant for policymakers in countries struggling with balancing speed, cost-effectiveness and just transition concerns in similar transition processes: phasing out coal, gas, or oil from their energy system. The findings may also inform future energy transition research.